CEOs shouldn’t pick their replacements


https://www.beckershospitalreview.com/hospital-management-administration/viewpoint-ceos-shouldn-t-pick-their-replacements.html?origin=ceo&utm_source=ceoe

Image result for ceo succession

While CEOs may be intimately familiar with their companies, their opinion should take a backseat to the organization’s board of directors, according to Stanford (Calif.) University business school professor David Larcker, PhD, and researcher Brian Tayan.

In an op-ed for The Wall Street Journal, the authors note that while it was once general practice for CEOs to pick their successors, changes to corporate governance in recent years have shifted the balance of power to a company’s “independent, professional, outside directors.”

The authors claim that allowing a company’s CEO outsize influence on the hiring of their successor is a mistake because the CEO may not have the right perspective on evaluating candidates and may intentionally or unintentionally control the information presented to the board about candidates, shaping the board’s decision about those individuals.

“At the end of a long career, many CEOs are concerned about their legacy. This can bias them toward favoring candidates who will guide the company in the same direction — and in the same manner — that they themselves led it,” they write.

Instead, the authors argue that a company’s board should be responsible for the final hiring decision and use the CEO’s input to help come to that conclusion.

“Hiring the CEO is a fiduciary duty. The board owes it to the shareholders … to get it right. A subcommittee of independent directors with previous experience in succession at other companies should manage the process, with an open invitation to all board members to participate. If the board doesn’t have depth of experience in place, it can bring in an outside adviser to help,” they write.

To access the full report, click here.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.